India, along with Brazil, Argentina and some other nations, has rejected an informal attempt by the European Union (EU) and Canada to work towards a global investment agreement at the World Trade Organisation (WTO)-level that would incorporate a controversial Investor-State Dispute Settlement (ISDS) mechanism.
The ISDS mechanism has become controversial as it permits companies to drag governments to international arbitration without exhausting the local remedies and claim huge amounts as compensation citing losses they suffered due to reasons, including policy changes.
“The EU and Canada have inked an investment pact that has incorporated the contentious ISDS. At the meeting (of trade ministers of select countries held on the sidelines of the recently held World Economic Forum in Switzerland), they wanted the investment pact to be the template for a similar multilateral agreement. India summarily rejected such an idea,”Commerce and Industry Minister Nirmala Sitharaman told reporters. Japan also opposed the idea on the grounds of the costs involved in international intervention.
“Only after all local options have been exhausted for settling disputes between a corporate and a government, do we want to permit issues to be taken up in international arbitration tribunals. Such provisions could be a part of bilateral agreements but they can’t be allowed in a multilateral agreement,” Ms.Sitharaman said.
She said at the recent trade ministers’ meeting held in Switzerland, India pushed for discussions on its proposal for a Trade Facilitation in Services (TFS) Agreement at the WTO-level. The pact, among other things, aims to facilitate easier movement of skilled workers and professionals across borders for short-term work.
“The TFS proposal was something which the WTO director-general himself welcomed. The TFS has never been a bargaining chip for India and it will never be one,” Ms.Sitharaman said when asked if India will dilute its position on the proposed investment pact if the developed world agreed to India’s demands for a TFS pact. Meanwhile, the EU has indicated to India that it wants to first conclude talks on a new Bilateral Investment Treaty (BIT) with India and then restart negotiations on the proposed bilateral free trade agreement. “I asked the EU Trade Commissioner when the free trade negotiations could re-start. She said they are interested in getting the investment agreement negotiated,” Ms. Sitharaman said. A year ago, India had asked all nations, with which it has BITs, to re-negotiate those agreements on the basis of the new draft text of BIT.